Comfort Systems USA(FIX) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported earnings of $8.25 per share for Q3 2025, doubling the earnings from the same quarter last year [5] - Revenue for Q3 2025 was $2.5 billion, an increase of $639 million or 35% compared to the previous year [7] - EBITDA for the quarter reached $414 million, a 74% increase from $238 million in Q3 2024 [10] - Free cash flow for Q3 2025 was $519 million, with year-to-date free cash flow at $632 million [10] - Net income for Q3 2025 was $292 million, compared to $146 million in Q3 2024 [10] Business Line Data and Key Metrics Changes - The electrical segment revenue grew by 71%, while mechanical revenue increased by 26% [7] - Gross profit for Q3 2025 was $608 million, up $226 million from the previous year, with a gross profit percentage of 24.8% [8] - Service revenue increased by 11%, now accounting for 14% of total revenue [14] Market Data and Key Metrics Changes - Industrial customers represented 65% of total revenue in the first nine months of 2025, with technology making up 42% of revenue, up from 32% the previous year [12][13] - The backlog at the end of Q3 2025 was a record $9.4 billion, a 65% increase year-over-year [12] Company Strategy and Development Direction - The company announced the acquisition of two companies, FZ Electrical and Meisner Electric, expected to provide over $200 million in incremental annual revenue [6][11] - The company plans to continue investing in its modular business, aiming for 3 million square feet of space by early 2026 [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continuing growth and strong results in 2025 and 2026, driven by solid bookings and demand [7] - The company expects same-store revenue growth in the high-teens range for Q4 2025 and low to mid-teens for full-year 2026 [8] Other Important Information - The company increased its quarterly dividend by 20% to $0.60 per share [6] - The company has a net cash position of $725 million as of the end of September [11] Q&A Session Summary Question: Does the bidding activity match the bookings and revenue growth seen in Q3? - Management confirmed that the pipeline remains robust, with more opportunities than can be handled [19] Question: How is the company thinking about capital allocation with strong free cash flow? - Management indicated a preference for deploying cash into acquisitions and share buybacks, while also considering accumulating cash if necessary [20][21] Question: Can you provide insights on the backlog growth and its timing? - Management noted that most of the backlog consists of jobs that have already started, with new bookings expected to begin within the next year [68] Question: What is driving the strength in service revenue growth? - The service business is seeing broad strength due to effective execution and investment in Salesforce collaboration [70] Question: How sustainable is the pace of hiring to support growth? - Management indicated that while hiring has been strong, they do not expect to maintain the same growth rate indefinitely, but are focused on training and apprenticeship programs [75]